Housebuilder shares surge after first-time buyer scheme announcement

Housebuilder shares rose sharply after the Government announced plans for a scheme intended to help first-time buyers in England purchase new-build homes.

The Your First Home initiative, unveiled at the weekend, will allow eligible buyers to purchase a new-build property with a 2.5% deposit, with the Government providing an additional equity loan worth 20% of the cost. The loans will initially be interest-free.

Further details, including a household income cap, local property price caps, costs and implementation timelines, are due to be outlined by Chancellor John Healey at next month’s Budget. Developers will also be expected to contribute when joining the scheme.

London-listed housebuilders recorded steep gains when trading opened on Monday. Barratt Redrow led the FTSE 100 Index higher, with its shares rising 12%. Persimmon, which is listed on the FTSE 250 Index, gained 15%, while Bellway and Taylor Wimpey each rose 12%. Vistry gained 10%.

Neil Wilson, UK investor strategist at Saxo, described the plan as “a big shot in the arm for housebuilders as much as first-time buyers”, saying it could boost demand and encourage construction. He noted that price caps meant only more modest homes would be eligible, but called the announcement “an unambiguous win for the industry”.

Richard Hunter, head of markets at interactive investor, said the housebuilding sector had faced higher mortgage rates, strained affordability and slow planning processes. James Nightingall, founder of property search service HomeFinder AI, said the new-build sector had been in need of an initiative to help restart the market.

Richard Donnell, executive director at Zoopla, said a targeted equity loan could increase first-time buyers’ purchasing power. However, he said the greatest impact on housing delivery would depend on more homes being built at the prices and sizes sought by first-time buyers. He added that the detailed price caps would be important in determining how much additional demand the scheme could unlock.

Paul Turner, chief executive of the National House Building Council, called the scheme “a welcome boost for the industry”, but said housing supply also needed to be addressed through faster planning reform and reduced unnecessary regulatory burdens. He said maintaining construction quality was also important.

Nicholas Mendes, mortgage technical manager at John Charcol, said reducing the deposit requirement to 2.5% could help people who could afford monthly repayments but had struggled to save while paying rent. He cautioned that the scheme was limited to new-build homes, which can carry a premium over comparable existing properties, and that the equity loan would eventually have to be repaid.

Andrew Montlake, chief executive of Coreco mortgage brokers, said the scheme’s effectiveness would depend on the details, including price caps, income limits, developer contributions and the arrangements after the interest-free period. John Newcomb, chief executive of the Builders Merchants Federation, said the industry needed support to rebuild confidence after a prolonged period of stagnant housebuilding.